Stop loss

[LiboNZT]

I've read everywhere how important is to set stop loss at every trade you make in order to avoid more risk and in the long run save your capital. I have 2 questions regarding this topic.

First, let's suppose I set my stops at X and the market closes above X so that it doesn't hit the stop. If the market opens tommorow at a price lower that X, will my stop loss command be executed immediately or will it be cancelled? At what price will it be executed?

And secondly, if there is no liquidity in the market, is it possible that my stop loss simply won't work? To be more precise, If nobody wants to buy from me or sell to me and the price keeps trending, is it possible that I might suffer greater losses than the ones I was planning to take?

 

[rawrschach]

Assuming an actual market

1- <X

2- yes

 

[Rhody Trader]

IFirst, let's suppose I set my stops at X and the market closes above X so that it doesn't hit the stop. If the market opens tommorow at a price lower that X, will my stop loss command be executed immediately or will it be cancelled? At what price will it be executed?

If you put the stop in at Good 'Til Cancelled then it will hold over to the next session and be executed at the next available bid price based on your position in the order queue when the markets opens. If the stop is only a day order then it will be cancelled at day's end.

And secondly, if there is no liquidity in the market, is it possible that my stop loss simply won't work? To be more precise, If nobody wants to buy from me or sell to me and the price keeps trending, is it possible that I might suffer greater losses than the ones I was planning to take?

Because a stop is a market order when the trigger price is reached or exceeded, the trade will execute against the next available bid (for a sell stop). That bid could definitely be well below your stop price in a thin, fast-falling market.

 

[NVP]

Hey believe me ...sometimes you will need that stop loss if a spike happens ....preventing severe margin calls

and also if your PC/system crashes and you have live trades on without stop losses ...asta la vista baby

N

 

[bigmistake]

Hello LiboNZT,

About your two these questions:
1. With my experience, in 99.9% of the brokers, your stop loss will be executed at market price as the market open if the price is bellow it.

2. It is virtually impossible for the market to have lack of liquidity for the small traders like us If that's not the case maybe you are going with thousands of lots in a trade.

Hope it helps.

 

[LiboNZT]

Thanks for the info guys!

 

[ffsear]

Some brokers now offer a guaranteed stop loss, why you get stoped out at a set price, even if the market gaps past it. Normally you need a pretty wide stop in the first place .

 

[Enzzo]

Hey believe me ...sometimes you will need that stop loss if a spike happens ....preventing severe margin calls

and also if your PC/system crashes and you have live trades on without stop losses ...asta la vista baby

N

 

[FringFX]

and also if your PC/system crashes and you have live trades on without stop losses ...asta la vista baby

or during a power blackout or whatever catastrophe....